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Business Combinations
 9 Months Ended
Jun. 30, 2022
Business Combination and Asset Acquisition [Abstract]  
BUSINESS COMBINATIONS
3. BUSINESS COMBINATIONS

Acquisition of ID R&D, Inc.
On May 28, 2021 (the “Closing Date”), the Company completed the acquisition of ID R&D (the “ID R&D Acquisition”) pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) dated May 28, 2021, by and among the Company, ID R&D and Alexey Khitrov (the “Representative”). Upon completion of the ID R&D Acquisition, ID R&D became a direct wholly owned
subsidiary of the Company. ID R&D is an award-winning provider of artificial intelligence-based voice and face biometrics and liveness detection.
As consideration for the ID R&D Acquisition, the Company agreed to pay an aggregate purchase price of up to $49.0 million. On the Closing Date, the equityholders of ID R&D received from the Company: (i) $13.0 million in cash, subject to adjustments for transaction expenses, escrow amounts, indebtedness and working capital adjustments (the “Initial Cash Payment”); and (ii) 867,226 shares or $13.9 million of Common Stock. In addition to the foregoing, the equityholders of ID R&D may become entitled to receive additional consideration from the Company upon achievement of certain milestones as follows (collectively, the “Earnout Payments”): subject to ID R&D’s achievement of target revenue for the period commencing on the Closing Date and ending on the one year anniversary thereof and the period commencing on the one year anniversary of the Closing Date and ending on the one year anniversary thereof (each such period, an “Earnout Period”): (i) an aggregate maximum amount of approximately $12.3 million with respect to the first Earnout Period and (ii) approximately $9.8 million with respect to the second Earnout Period, with 15% of the first Earnout Period’s payment to be deposited (as additional funds) into an escrow fund described below. The Company will
make the Earnout Payments in the form of cash and shares of Common Stock as set forth in the Merger Agreement. The Company has granted the Representative an option to shift the Earnout Period(s) out by one year, pursuant to the terms of the Merger Agreement. Moreover, in the event actual revenue for an Earnout Period exceeds the target revenue for such period, the amount of such excess will be credited towards the achievement of the subsequent Earnout Period’s Earnout Payment. In May and June of 2022, the Company paid the first of the Earnout Payments of $9.5 million which consisted of $6.8 million paid in cash and $2.7 million in shares of Common Stock to the equityholders of ID R&D. As indicated above, 15% of the Earnout Payment with respect to the first Earnout Period, will be deposited into the escrow fund.
The Company estimated the fair value of the consideration for the Earnout Periods to be $15.7 million on the Closing Date, which was determined using a discounted cash flow methodology based on financial forecasts determined by management that included assumptions about revenue growth and discount rates, and is included in level three of the fair value hierarchy. Each quarter the Company revises the estimated fair value of the consideration for the Earnout Periods and changes in the fair value are included in amortization and acquisition-related costs in the consolidated statements of operations and comprehensive income (loss). See Note 5. “Investments,” of the notes to consolidated financial statements for more information relating to the consideration for the Earnout Periods.
The Company incurred $0.6 million of expense in connection with the acquisition primarily related to legal fees, outside service costs, and travel expense, which are included in amortization and acquisition-related costs in the consolidated statements of operations and comprehensive income (loss).
On the Closing Date, the Company deposited a portion of the Initial Cash Payment and a number of shares of Common Stock having a collective value of approximately $4.0 million into an escrow fund to serve as collateral and partial security for working capital adjustments and certain indemnification rights of the Company. The escrow fund will be maintained for up to 24 months following the completion of the ID R&D Acquisition or until such earlier time as the escrow fund is exhausted. The Company used cash on hand for the Initial Cash Payment.
Acquisition of HooYu Ltd
On March 23, 2022, the Company completed the acquisition of HooYu Ltd (the “HooYu Acquisition”) pursuant to the Purchase Agreement (the “Purchase Agreement”) dated March 23, 2022, by and among the Company and certain persons identified in the Purchase Agreement (the “Sellers”). Pursuant to the Purchase Agreement, the Company, among other things, acquired 100% of the outstanding share capital of HooYu Ltd (“HooYu”), a leading global customer onboarding platform designed to increase the integrity of KYC and maximize the success of customer onboarding. As consideration for the HooYu Acquisition, the Company paid aggregate consideration in the amount of $129.1 million in cash (the “Closing Consideration”), as such amount may be adjusted for transaction expenses and indebtedness. Pursuant to the Purchase Agreement, $1.6 million was withheld as a reduction to the Closing Consideration and is being retained by the Company for the final working capital adjustments and indemnification of certain tax matters under the Purchase Agreement.
The Company incurred $3.2 million of expense in connection with the acquisition primarily related to legal fees, outside service costs, foreign currency and realized losses on investments, and travel expense, which are included in amortization and acquisition-related costs in the consolidated statements of operations and comprehensive income (loss).
On March 23, 2022, the Company transferred an aggregate of $127.5 million to the Sellers and its third-party legal and investment advisors. The Company used cash on hand for the cash paid on March 23, 2022.
Acquisitions are accounted for using the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations. Accordingly, the results of operations of ID R&D and HooYu have been included in the accompanying consolidated financial statements since the date of such acquisition. The purchase price has been allocated to the tangible and intangible assets acquired and liabilities assumed based upon the respective estimates of fair value as of the date of the ID R&D Acquisition and are based on assumptions that the Company’s management believes are reasonable. The Company is in the process of completing its valuation of the acquired deferred income taxes related to the HooYu Acquisition and will complete the evaluation once the fiscal
2021 tax return has been completed. The final allocations of the purchase price to deferred income taxes may differ materially from the information presented in these unaudited consolidated financial statements.
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed from the ID R&D Acquisition and HooYu Acquisition as of their respective closing dates (amounts shown in thousands):
ID R&DHooYu
Accounts receivable$173 $1,234 
Property, plant, and equipment114 243 
Other current assets147 630 
Intangible assets16,930 73,100 
Goodwill27,748 74,312 
Current liabilities(425)(2,456)
Deferred revenue— (2,612)
Deferred income tax liabilities(2,355)(16,896)
Net assets acquired$42,332 $127,555 
The goodwill recognized is due to market participant synergies and other factors and is not expected to be deductible for income tax purposes. The Company estimated the fair value of identifiable acquisition-related intangible assets with definite lives primarily based on discounted cash flow projections that will arise from these assets. The Company exercised significant judgment with regard to assumptions used in the determination of fair value such as with respect to discount rates and the determination of the estimated useful lives of the intangible assets. The following table summarizes the estimated fair values and estimated useful lives of intangible assets with definite lives acquired from the ID R&D Acquisition and the HooYu Acquisition as of their respective closing dates (amounts shown in thousands, except for years):
ID R&D
Amortization PeriodAmount assigned
Completed technologies7.0 years$14,020 
Customer relationships3.0 years2,540 
Trade name5.0 years370 
Total intangible assets acquired$16,930 
HooYu
Amortization PeriodAmount assigned
Completed technologies7.0 years$61,400 
Customer relationships5.0 years5,000 
Trade name5.0 years6,100 
Covenants not to compete3.0 years$600 
Total intangible assets acquired$73,100 
The following unaudited pro forma financial information should not be taken as representative of the Company’s future consolidated results of operations and includes adjustments for the amortization expense related to the identified intangible assets. The following table summarizes the Company’s unaudited pro forma financial information and is presented as if the ID R&D Acquisition and the HooYu Acquisition occurred as of the beginning of the fiscal year preceding the acquisition (amounts shown in thousands):
Three months ended June 30,Nine months ended June 30,
2022202120222021
Pro forma revenue$39,333 $34,191 $112,256 $94,661 
Pro forma net income (loss)$812 $(1,344)$(4,766)$(6,669)
Revenue and net loss from HooYu included in the consolidated results of operations from the date of the HooYu acquisition through June 30, 2022 were $2.7 million and $0.8 million, respectively.